Is The Sparkle Coming Off of Jewelry Stocks?

While the rally in gold prices this year has boosted the stocks of gold miners, the jewelry industry hasn’t been able to derive any significant benefits from it. Shares of most Jewelers are currently trading in the red year-to-date, underperforming the broader market. Among the some 750 investors we track at Insider Monkey, jewelry stocks are not particularly popular, but, nevertheless, we decided to compile a list of four stocks that attracted more attention than the rest of the industry.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).

186PIX/Shutterstock.com

#4. Blue Nile Inc (NASDAQ:NILE)

– Investors with long positions as of March 31: 13

– Aggregate value of investors’ holdings as of March 31: $54.46 Million

First up on our list is Blue Nile Inc (NASDAQ:NILE), which saw the number of funds followed by us bullish on the stock inching up by one, but the aggregate value of their holdings slid by 22% during the first quarter. Blue Nile Inc (NASDAQ:NILE)’s stock lost almost one-third of its value during the first quarter, a large part of the decline in hedge funds’ holdings in the company can be attributed to that. The company posted worse-than-expected results several quarters in a row as lower jewelry prices put pressure on the company’s sales. For the second quarter, the revenue of $113.77 million and EPS of $0.18, missed the estimates by around $0.2 million and $0.03, respectively. Revenue growth was close to flat year-on-year on the back of lower average selling prices across different price points.

#3. Movado Group, Inc (NYSE:MOV)

– Investors with long positions as of March 31: 19

– Aggregate value of investors’ holdings as of March 31: $75 Million

Moving on, the number of investors covered by us long Movado Group, Inc (NYSE:MOV) increased by five and the total value of their positions saw an increase of $15.4 million during the first quarter. On May 26, the company reported mixed results for the first quarter of fiscal 2017, declaring EPS of $0.19 on revenue of $114.10 million versus analysts’ expectation of EPS of $0.16 on revenue of $115.59 million. The stock has lost over 9% since the beginning of the year and is currently trading at just 12 times earnings, lower than the industry average of 19. The company also pays a quarterly dividend of $0.13, which gives the stock a yield of 2.23%.

#2. Tiffany & Co. (NYSE:TIF)

– Investors with long positions as of March 31: 26

– Aggregate value of investors’ holdings as of March 31: $372.2 million

Tiffany & Co. (NYSE:TIF) is the only stock in this list, which saw the number of investors holding shares fall by four during the January-March period. Shares of Tiffany have lost 13% year-to-date, affected by the company’s financial results for the first quarter of fiscal 2017, which came lower than the consensus estimates for EPS and revenue. Analysts have also expressed concerns that the company is losing its appeal to younger customers, which, along with the tax hike by the Chinese governments on luxury goods purchased from abroad, would negatively impact the company’s financials going forward.

#1. Signet Jewelers Ltd. (NYSE:SIG)

– Investors with long positions as of March 31: 55

– Aggregate value of investors’ holdings as of March 31: $2.67 billion

Though the number of hedge funds tracked by us with long positions in Signet Jewelers Ltd. (NYSE:SIG) inched up by two during the first quarter, the aggregate value of their holdings plummeted by $645 million during the same time, but they still held around 27.50% of the company’s float at the end of first quarter. The stock is down by more than 26% since the beginning of the year on the back of weaker-than-expected results, as well as after the company got embroiled in controversy in June. A report in June accused employees of Signet Jewelers’ Kay retail stores of swapping expensive diamonds with cheaper ones. In addition, analysts expressed concerns that Signet’s approach towards financing and certain accounting practices should raise questions regarding the company’s future performance.

Disclosure: None